- The "So Easy It’s Ridiculous" Forex Trading System -
- Trade Example: Sell EUR/USD
- Here's when it might be best to trade the stock market
- Simple Swing Trading Strategy That Helped Me
- Follow the Author
A long time ago, I did something really dumb with my options trading, and I lost a significant amount of money because of it. In this article, I am going to share with you my story along with the lessons to be learned so that you can avoid unnecessary pain and loss in your own trading. The article includes real numbers and calculations because you have to be able to understand and calculate your costs and gains if you want to be a successful options trader. After the wonky stuff, I include some advice for how to avoid making the type of mistake that I did, as well as some advice on how to approach mistakes that inevitably happen anyway.
My investing philosophy has almost always been long-term buy-and-hold or LTBH: buy stock in solid, high-performing companies with strong leadership and a deep competitive moat, and then hold the stock for years if not decades. Note that investing is not the same as trading. The difference between the two is a topic for another article, but essentially, the equity in my long-term investments is the foundation for my options trading.
The "So Easy It’s Ridiculous" Forex Trading System -
SBUX has been a steady performer over the years, steadily increasing over the long term. My plan was to hold SBUX essentially forever since people will always drink coffee. So this is where our story begins. There is a stock options trading strategy known as a covered call in which you sell one call option for each shares of an underlying stock that you already own or which you buy concurrently with selling the call. Seems like a pretty easy way to get rich with options , right?
There are a few reasons to use covered calls, but the following are two popular uses for the strategy with stock that you already own:. I actually thought for probably about ten seconds about the risk of losing one of my best long-term performers, but the idea of that juicy premium not going into my wallet got the better of me. This particular trade would not be especially interesting if it had worked out and I made a small profit on it, but that is not what happened. My first mistake was that I chose a strike price If SBUX moved up by only.
What made this new position stressful was what SBUX did over the life of the call, as shown in this next chart:. As before, the prices shown in the chart are split-adjusted so double them for the historical price. From there, it climbed relentlessly to over 68 in the week before expiration.
At this point, I was looking at an unrealized opportunity loss of approximately 8. Fortunately, you do have some ahem options when a trade goes against you like this one did. Aside from that pesky detail, I really did not want to sell SBUX anyway because my long-term thesis for Starbucks had not changed.
It was an investment that I wanted to continue for many years to come. Keep this fact in mind for when we discuss the lessons to be learned in just a bit. At the time, they were trading at Not an ideal outcome. Finally, I had the option to roll the calls out and up. This comprehensive indicator can be combined with several different trading strategies.
Trade Example: Sell EUR/USD
The reason Chaikin Money Flow is the best volume and a classical volume indicator is that it measures institutional accumulation-distribution. Typically on a rally, the Chaikin volume indicator should be above the zero line.
Conversely, on sell-offs, the Chaikin volume indicator should be below the zero line. If you can master volume analysis, a lot of new trading opportunities can emerge. The smart money is present even in the FX market and their footprints are still visible. With all their efforts to hide their trading activities, the Chaikin Money Flow will give you a window into the volume activity the same way you have when you trade stocks.
To really understand what makes a price pattern work, we really need to understand the market forces behind the price chart. In simple terms, the interaction between traders placing buy and sell orders is the real force that drives the price. In other words, this is what we call the money flow. Understanding the money flow will give you a better understanding of how the market really works. Unfortunately, the center of attention of the majority of traders is on the price the Effect and not on the money flow aka the Cause. The money flow index gives dumb money the chance to become smart money.
As a final warning, be also aware of the shortcomings of relying solely on the MFI indicator.
Here's when it might be best to trade the stock market
All sentiment indicators have the problem of generating false buy and sell signals. Once you understand the game behind the price action a new reality will be accessible to you. Please Share this Trading Strategy Below and keep it for your own personal use! Thanks, Traders!
We specialize in teaching traders of all skill levels how to trade stocks, options, forex, cryptocurrencies, commodities, and more. Our mission is to address the lack of good information for market traders and to simplify trading education by giving readers a detailed plan with step-by-step rules to follow. Forex Trading for Beginners. Shooting Star Candle Strategy.
Simple Swing Trading Strategy That Helped Me
Swing Trading Strategies That Work. Please log in again.
- free trial binary options signals?
- minute by minute forex news!
- The “So Easy It’s Ridiculous” Trading System!
- Stop Calling Them ‘Dumb Money’: Retail Investors Are Revolutionizing the Stock Market!
- rubicon forex indicator;
The login page will open in a new tab. After logging in you can close it and return to this page.
- bank of china sg forex?
- What is Forex Stop Hunting?.
- dashboard forex expert advisor free.
- Quantitative Funds And The New Dumb Money.
- Welcome to Reddit,.
Coming back later with some figures. Thanks for the update tommor.
Follow the Author
While the majority of sessions produce positive returns, keep trading using with-trend positions as defined. As soon as the majority of sessions using this rule become losers, reverse the trade directions. On average, 12 trades were taken per day. Counter-trend daily positions continue to make profit, i.
But sloping over what timeframe? Are you just eyeballing it? If its flat, I go back to the day before and take the slope direction at that close. Just finished reading through your thread. I love simplicity! Thanks for keeping this going and updating us on your progress.
All the best. There needs to be a really good reason within the terms of the strategy to not use a SL. These trades are minimum stake per pip and are closed after max. As they are baskets of usually about 14 trades there is also some degree of hedging each day.